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Impact Of Economic Policies On Entrepreneurship

Impact Of Economic Policies On Entrepreneurship

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The private sector which typically can contribute to the sustainable growth of an economy is often stifled by government policies that ultimately hinder a country’s ability to be competitive.

We see governments in developing nations who have the necessary resources to develop policies that will trigger economic growth, do not follow through with actualising these investment-friendly policies. It is a sad reality what the average entrepreneur in Nigeria faces where the existing economic policies and operating environment has been identified as a key impediment to the success of entrepreneurs. The place of policy in entrepreneurship cannot be overstated because the key to the sustained success of entrepreneurs lies in the creation of an enabling environment for businesses to thrive. Such is the impact that economic policies have on the businesses that it becomes critical that policymakers work closely with the private sector in the design of policies that support entrepreneurship. Policies must reflect the real needs and concerns of the African entrepreneurs and their businesses.

In an emerging economy like Nigeria, the engagement between the public and private sector to discuss and co-develop economic policies are rare but should happen more often. This can provide a platform for citizens to access their political leaders, compelling them to address concerns around security, employment, and the economy (amongst others). Research suggests that there is a direct relationship between such sessions and the extent to which the government can formulate policies that are most relevant to the people. The success of entrepreneurs and thus, the private sector really does depend on such opportunities for businesses to highlight persistent challenges and issues in need of urgent government intervention. 

For Nigeria, these dialogues are often centred around the lack of an enabling business environment specifically, the lack of adequate infrastructure (especially power). It’s important to point out that while hard infrastructure is critical, soft infrastructure like the business environment and the policies regulating it, cannot be ignored and the Federal Government of Nigeria has demonstrated the political will to push for implementation and a commitment to execution. The government established the Presidential Enabling Business Environment (PEBEC) to improve the ease of doing business in Nigeria and amongst its achievements, PEBEC has reduced the registration period for new businesses and eased the procedures for entry into and exit out of the country. To build on these reforms, the FG developed the 2019 Finance Bill, set to be implemented this year. According to the bill, small businesses with a turnover of less than N25 million are to be exempted from Companies Income Tax. These reforms and policies while welcome, are not doing enough (which means the problems remain circular). With high cost of tax compliance and complex business processes, many SMEs are choosing to remain informal, which in turn results in a low tax base and low tax contribution to GDP. This low contribution means the concerns of entrepreneurs might never be prioritised. 

Aside from economic policies stifling business growth internally, Africa is still behind in terms of trading with each other, and the world. This calls for the right economic policies which will work to change this and create a conducive environment for businesses to thrive. A new generation of global businesses are looking at Africa as a large market for furthering their services or supply chain and without the right regulatory frameworks in place, there will be no way to attract sustainable investments and in turn, help speed up the economic development of the continent.

Today, there are about 200 million people aged between 15 and 24 in Africa, making Africa the continent with the youngest population globally. This current trend indicates that this figure will double by 2045, according to the African Economic Outlook. The conundrum of the chicken and the egg and which comes first applies here. In comparison to the government, the private sector creates most jobs that sustained economic growth is dependent on. The government, however, enables the private sector to create the jobs we desperately need. So, which comes first? Nigerian policymakers must have the willingness to take bold steps and make firm commitments in creating enabling environments for businesses to thrive so that their contribution can drive sustained growth and development.

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